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Economy grew faster than previously estimated in Q3

The Commerce Department reported Tuesday that third-quarter GDP grew at an upwardly revised rate of 2.1%, in line with economists’ forecasts. The revision is an improvement on the government’s initial 1.5% estimate but still weaker than the 3.9% growth in the second quarter.

The AP (11/24, Crutsinger) says the new figure was attributed to stronger business-inventory numbers, noting that the Commerce Department now calculates that stockpiles pulled down growth in the July-September quarter by 0.6% rather than 1.4% as previously thought. According to the AP, the fresh data “should give the Federal Reserve confidence as it considers an interest rate hike at its next meeting in December.”

Bloomberg News (11/24, Stilwell) reports that the updated estimate reflects “a smaller hit from efforts to rein in bloated inventories,” which increased at a $90.2 billion annualized rate during the third quarter, “almost twice as much as previously estimated.”

USA Today (11/25, Davidson) cites Tuesday’s official data in reporting that trade “was more of a drag on the economy than initially estimated as a strong dollar made exports more expensive for foreign customers and imports cheaper for US consumers.” Exports were up 0.9%, while imports increased 2.1%, the story says.

Chief Economist Chad Moutray, in the association’s Shopfloor (11/24) blog, concurs that the revised GDP data are “likely to further enhance the probability” of a Fed decision to “raise short-term interest rates next month.” He adds, “For their part, manufacturers continue to anticipate modest growth moving forward, but their outlook remains guarded, particularly in light of current headwinds.”